How to Screen Tenants: Finding Responsible Renters
As a landlord, figuring out how to screen tenants is vital to the success of your community (and profits!). We all know how destructive bad tenants, high turnover rates, and evictions can be for business.
A prospect may seem great during the first showing. However, the truth is that you don’t know anything about them! They’re interested in renting your property, so they’ll be looking to make a great first impression.
However, if you want to make sure you’re getting the best renter, you’ll need to thoroughly evaluate all prospects during the screening process.
Here’s everything you need to know about how to screen tenants. We’ll show you how it can help you find the best tenants for your rental property.
How to Screen Tenants
Tenant screening isn’t rocket science. However, figuring out how to screen tenants does require some time and effort on the part of the landlord or property manager.
Not sure where to start? We’ve got you covered with a breakdown of the steps it takes to effectively screen tenants.
1. Set Your Standards
Just because you’re renting out your property doesn’t mean that you don’t have a say in who you allow to use it. The first step in how to screen tenants is coming up with a list of standards regarding any prospective tenant’s qualifications.
- Credit History
- Landlord and Employment References
- Criminal History (if applicable, laws vary by state)
With regard to these standards, you’ll have to keep a few things in mind. A tenant’s income should typically meet or exceed the industry standard of 2-3x their monthly rent payment.
It’s imperative to stick to this standard. Ignoring it can cost you both time and money in the long run.
Evictions, typically due to an inability to pay rent, cost landlords around $3,500 on average and can take up to four weeks to complete.
They’re definitely something to proactively avoid. That said, sometimes evictions occur due to frequent lease breaches.
It’s important to inform your tenants of your lease terms upfront. Some landlords enact a strict no-pet policy or prefer non-smoking tenants. Some don’t want to end up dealing with a long-term guest situation.
Regardless of what your specific policies are, it’s imperative that you make sure all applicants are aware of these things well before signing a lease agreement.
2. Request a Tenant Application
First thing’s first — you should request a tenant application from all of your potential tenants.
A tenant application serves the dual purpose of gathering any pertinent identifying information about a prospect and determining whether they provide honest answers on their application.
Your application should require information such as their name, birth date, income, employment history, and more. You’ll use this information to run a background and credit check.
However, your application should also clearly state that by submitting this information, a prospect is agreeing to be subjected to a background check, criminal history, or credit check.
Once you have their completed application, thoroughly review it. Here’s what you need to look out for on a rental application:
- Employment Status — A scattered employment history isn’t necessarily a reason to decline an application. However, the prospect should be able to show that they have a stable job or source of income that will allow them to comfortably pay rent.
- Household Income — If you’re renting to multiple tenants in one unit, the household income or the income of every tenant should still meet or exceed the standard rent-to-income ratio. They’ll need to provide relevant and up-to-date proof of income.
- Financial Standing — You’ll need to find out whether a prospect has any outstanding debts that may severely impact their income. For example, credit card debt, a low bank account balance, or child support payments may indicate poor financial standing.
- Apartment References — Not all prospects have rental history. But those that do should be willing and able to provide references from landlords that indicate timely rent payments, respect of the property, and their reasons for leaving.
- Household Size — It’s illegal to discriminate due to familial status. However, you’re allowed to ask about the number of individuals that’ll be living at the property.
- Number of Pets — If your prospect has pets, you can ask about the number of pets they’ll have living at the property. This will help you determine whether to ask for a pet deposit or require a tenant to pay pet rent.
- Personal References — Prospects should have at least 2-3 personal references that can attest to their character and their ability to be a good tenant.
Pro Tip: If a tenant leaves out information or purposely fills out their application with false information, RUN. This indicates that the prospect has something to hide.
3. Run a Credit Check
If you’re running a credit check, be sure to abide by the regulations outlined by the Fair Credit Reporting Act (FCRA).
While you’re legally allowed to reject a prospect’s application based on negative information found on their credit report, you’re legally required to inform them of their right to a free credit report from the reporting agency.
Depending on your state’s laws, you may be able to charge a prospective tenant for the cost of running a credit check. That typically runs about $40.
Additionally, any information that you glean from a credit report that impacts your decision to rent to a tenant, including:
- requiring a larger security deposit,
- a cosigner, or
- increasing the rent
...requires an adverse action notice.
4. Run a Background Check
A background check is an invaluable tool for landlords. It’s a great way to predict a tenant’s behavior.
Even prospects that look great on paper and have stellar financials can have secrets that indicate the strong likelihood that they’ll be poor tenants.
You can use a background check to unearth past evictions, criminal records, and any relevant information that’s readily available in the public record.
5. Contact References
Following up on references can be a bit of a hassle. However, they can offer a treasure trove of information about prospective tenants. Personal references and employers can help to paint a full picture of the tenant.
However, it’s the previous landlord’s references that you should focus on. Contact any and all of the tenant’s previous landlords. Be sure to ask them pertinent questions, such as:
- Did the tenant pay rent on time?
- Did the tenant ever breach the covenant of quiet enjoyment?
- Did you have to withhold any of the security deposit to pay for excessive damage?
- Would you rent to this tenant again in the future?
6. Interview the Tenant
If you’ve decided to move forward with a prospective tenant, schedule an interview with the prospect to finalize things.
During this time, you should be sure to ask the tenant to fill in any blanks that you may have come across during your screening processes. Those may include a renting gap or employment gap.
Additionally, you can ask questions that’ll give you a better understanding of their intentions as a tenant. These will also help you to get a sense of what they’re like as a person.
Here are some questions to ask:
- Do you have any pets? If so, what breed are they? Are they housebroken?
- Do you have plans to get a roommate in the future?
- Do you smoke? If so, do you smoke indoors or outdoors?
- What is your typical workday like? Do you work any night shifts or nontraditional hours?
- Do you have any guests who frequently spend the night at your home?
Though your interview should be thorough, it needs to comply with the law. For example, asking invasive questions about a tenant’s disabilities, religion, ethnicity, familial status, age, or sexual orientation could be grounds for a housing discrimination complaint by the HUD’s Fair Housing and Equal Opportunity branch.
The value of a thorough tenant screening process can’t be understated. In addition to ensuring that you find only high-quality long-term tenants to occupy your units, tenant screening can help to guarantee your income.
Since it requires an in-depth look into your prospective tenant’s financial status, tenant screening helps to reduce the chances that you’ll have to deal with frequent rent defaults and high tenant turnover.
However, it’s important to remember that all tenant screening must comply with local and federal law. Federal fair housing laws make it illegal to commit an adverse action against a prospective tenant because of their race, religion, ethnic background, sex, familial status, or disability.
Doing so can result in a court case brought against you, fines, and more. Some state laws prohibit discrimination based on sexual orientation, marital status, and age.
The Bottom Line
Figuring out how to screen tenants helps find high-quality renters based on a fair set of standards that measure their ability to pay rent on time, respect your property, and be good neighbors. Those are the most important qualities of a good tenant.